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Federal Circuit Expands Law of Inducement to Capture Multi-Party Infringement

Intellectual Property Litigation Law Update Christian G. Stahl, Michael J. Curley

On August 31, 2012, the Court of Appeals for the Federal Circuit ruled in a 6-5 en banc decision that a party may be liable for inducing infringement of a method claim, even where all the steps of the claim are not performed by a single actor. Akamai Technologies, Inc. v. Limelight Networks, Inc., 2009-1372, -1380, -1416, -1417 (Fed. Cir., Aug. 31, 2012).

Under previous rulings, liability for inducing infringement applied only when one party controlled or directed the performance of all of the steps of the claim. In many computer method claims, for example, steps are performed on computers operated by different entities. In this situation, no single party controls the method, and accused infringers defended themselves using a multi-party infringement defense. The Akamai Technologies decision will limit this defense, and make it easier for patent holders to enforce patents claims in which multiple actors collectively perform the steps. The decision will have a significant impact on the enforcement of internet, business, and computer method patents.

In Akamai Technologies, the Federal Circuit addressed "whether liability should extend to a party who induces the commission of infringing conduct when no single 'induced' entity commits all of the infringing acts or steps but where the infringing conduct is split among more than one entity." Slip Opinion at pg. 14.

The opinion decided two cases: In the first, Defendant Limelight maintained a network of servers allowing efficient content delivery by placing some of the content on its servers. This method is covered by Akamai's patent. Limelight did not, however, modify the content provider's web pages itself as required by the patent. Instead, Limelight instructed its customers on the steps necessary to modify the content provider's web pages. Thus, Limelight was alleged to perform some steps of the claimed method itself, while inducing others to perform the remaining steps. Akamai alleged that Limelight was both directly infringing and inducing infringement through its customers. See Slip Opinion at pg. 11.

In the second case, Defendant Epic Systems Corporation licensed software to health organizations that permitted healthcare providers to communicate with patients. Plaintiff McKesson Information Solutions LLC owns a patent covering a method of electronic communication between healthcare providers and their patients. McKesson sued Epic under an induced infringement theory. However, Epic did not itself perform any of the steps of the patent. Instead, the patients of the healthcare provider licensees initiate communications and the healthcare provider licensees perform the remainder of the steps. Thus, Epic was alleged to have induced third parties who, collectively, performed all of the steps of the claimed method. See Slip Opinion at pg. 11.

In both cases, the district courts held that defendants did not induce infringement because one actor did not perform all of the steps of the claimed method - in Limelight's case because customers performed one of the steps of the claimed method, and in Epic's case because the patients, and not Epic's direct customers (the healthcare provider licensees), performed the step of initiating communication. See Slip Opinion at pg. 12.

The Federal Circuit reversed and remanded both cases, holding "that all of the steps of a claimed method must be performed in order to find induced infringement, but that it is not necessary to prove that all the steps were committed by a single entity." Slip Opinion at pg. 10.  This decision overrules the Federal Circuit's prior ruling in BMC Resources, Inc. v. Paymentech, L.P., stating that inducement requires proof of a single actor directly infringing the patent. 498 F.3d 1373 (Fed. Cir. 2007). The new rule provides for patent infringement inducement liability where the accused infringer: (1) knew of the patent; (2) induced performance of the steps of the method of the patent; and (3) all of those steps were actually performed.

While Akamai allows the assertion of method claims in multi-party infringement situations, the usual requirements of an inducement claim still apply. Significantly, in order to be liable under Akamai, an accused inducer must know of the patent at issue. Accordingly, from a practical standpoint, inventors and their patent counsel should continue to endeavor to draft claims in such a way that they can be directly infringed by a single actor.

If you have questions regarding this client alert, please contact Christian Stahl at (312) 715-5220 / christian.stahl@quarles.com, Michael Curley at (520) 770-8768 / michael.curley@quarles.com or your Quarles & Brady attorney.